When I was growing up, my grandparents lived in the mountains outside of a small, rural northern California town, far removed from the comforts of modern city living. They had electricity, but there was no city water or sewer out there, not even phone lines. Communication with the outside world was achieved via two-way radio. A well and septic system provided for the essentials.

But my grandparents’ well wasn’t all that deep, and the water wasn’t all that plentiful. The necessity of turning water on and off during showers taught me an important lesson about the conservation of limited resources! Despite being conservative with usage, by the end of summer, there were times when only sludge would come out of the tap.

But after a few years, they had a second, deeper well drilled. From then on, worrying about running out of water was a thing of the past.

How Deep is Your Well?

Those of you growing your real estate businesses already know that it requires a lot of capital. And unless you were fortunate enough to have started with a lot of wealth, you know that having access to the capital of others is essential if you are trying to scale. You need to have a base of investors, and continuously grow it.

A pool of investors is just like my grandparents’ well. If you keep using it, the water will dry up. You need to dig more wells—and deeper ones, as you grow.

Which Comes First, the Chicken or the Egg?

The classic “chicken and egg” scenario in real estate investing applies to the question of what comes first, the deal or the money? Just like you wouldn’t go to the grocery store without your wallet, shopping for real estate without the money to buy it doesn’t make sense.

But by now you’ve heard the phrase, “Find the deal and the money will follow.” Surely everyone saying that can’t be wrong, right?

I’ve got bad news for you—they are. And it won’t.

But there is also good news. Securities laws are very specific about how you solicit investors for your deal. But if you have no deal, the only thing you are soliciting is yourself, your ability, and your dream. What better time to build those “pre-existing relationships” than when you have no offering to solicit? It certainly reduces the risk of running afoul with the law.

How to Get Money Without a Deal

Looking for investors—digging those wells—happens by talking about what you do, how you do it, what results you’ve produced, and what results you expect. If you’ve never raised money before, forget about pitching your idea to wealthy, accredited investors that you’ve never met. Those guys get pitched all the time and have the pick of the litter. Instead, focus on an audience that is more likely to listen to you—people you already have relationships with.

There’s a reason why most startups are funded by friends and family of the founder. It’s because it works, but more so it’s because no one other than the founder’s inner circle is likely to take the risk on an unproven idea. Your real estate business is no different.

“But my friends and family don’t have any money!” Yeah, I’ve not only heard that before, but I’ve lived it. When I started in this business, I was 20 years old and working in a grocery store. I didn’t know anyone who could rub two nickels together; all of my friends were living check to check just as I was. But that didn’t stop me from talking. Word gets around. Your inner circle grows. Conversations develop. And things happen. You must be consistent, authentic, and transparent.

Answer people’s questions and be helpful, never argumentative, and always aim to add value to the conversation. Over time, relationships will develop.

What to Say to People

What do you say when talking to your inner circle? Tell people that you are in the real estate investment business. Tell them about deals you’ve done and deals you plan to do. If you haven’t done any deals, find a partner who brings something to the table that you don’t, and do some deals together to build your track record.

Don’t make this a pitch; just integrate your story into the conversation. And you should talk about this with everyone, even if you don’t think the person is a potential investor—the idea is to spread the word. Maybe they tell a friend who turns out to be interested and they put you together.

When you go to meet an interested investor, start by simply telling your story. How did you get into this business? Why? What is your outlook on the market? What are your thoughts on the opportunity, competition, returns, and risk? Put together a slide deck (printed is fine; don’t walk around with a projector and screen) showing a deal similar to the one you plan to do, including a full financial analysis and some pictures. The last slide should be your bio, highlighting your knowledge, experience, and accomplishments.

The conversation could go like this: “Here is an opportunity I analyzed that is very similar to the one I’m looking to purchase in the near future. I would do X, Y, and Z to it (substitute for what you would actually do) and we would sell it in X years with the objective of delivering X percent return to you as an investor. Here are some examples of how I’ve (or my partner and I have) been successful in the past…”

Expectation Management

After you’ve been in this business for a while, you’ll find that it’s really all about managing expectations. It’s important to give projections that you know you can achieve, and outperform on them so your investors will be happy.

I’ll do the same for you, by setting your expectations for what it’s like to raise capital. And because I don’t have a $20,000 boot camp to sell you, I can shoot it to you straight. If you are starting from scratch, it’s going to take time. Relationships develop slowly. It’s hard. In fact, it’s even harder than you think, unless of course you are fortunate enough to already have a somewhat wealthy or connected inner circle. But if you stay consistent and constantly work toward your objective, you can get there. If I can, you can. It took me several years to get investors to believe in me. With today’s technology and social platforms, you can do it faster than I did.

Keep Drilling

As real estate entrepreneurs, we should always be in “capital raise mode.” This means whether we are currently trying to fund a deal or not, we are always seeking new investors. Whether you are actively looking to scale, or just keeping your eyes open for the right opportunity to add another property to your portfolio, drilling your well before the escrow clock starts ticking puts you in a position to make an offer on the property with the confidence that the money to close it will be there. Don’t let yourself run out of water. Drill, baby, drill!